Letter from Langdon: Breaking What’s Fixed
[imgbelt img=employment-gains.png]The federal government’s broken promises on ag policy have created hardship and loss for America’s farmers. Just when we’ve stumbled on a formula that strengthens rural communities, will the government back out one more time?
Later that week we weighed the calves. It turned out I’d done OK because they were exactly the size I thought. My neighbor looked crushed by his lightweight calves. But he stuck by our agreement and the cattle were mine at a fair price.
He made money and I made money.
Promises are easy to make but can be difficult to keep. Farmers learned that the hard way when a newly appointed Agriculture secretary named Earl Butz dismantled a lot of New Deal grain supply management programs, replacing them with an admonition to farmers, “plant fencerow to fencerow,” because grain demand was growing.
After fencerows were planted, he and the Nixon Administration backed out of the deal with an embargo when grain prices rose. Then President Ford did it too. And President Carter repeated past embargoes in retaliation against the Soviet Union invasion of Afghanistan.
Drought, grain embargoes and price controls plunged U.S. farms into a recession. When financially distressed farmers drove their tractors to Washington in protest, the populist American Agriculture Movement was born.
With U.S. farm policy in disarray, investors saw opportunity in South America, where farm products could be bought and sold in a less political environment. Demand decreased at home while competition from foreign supplies increased.
America simply couldn’t be trusted.
Broken promises resulted in a farm recession and falling land values, lasting throughout the 1980s into the ’90s. Finally the 1996 farm bill was passed. Success of that farm bill relied on paying subsidies to grain farmers, allowing grain values to fall to market clearing prices.
The cheaper the better.
The whole point of spending all that taxpayer money on farmers was to create new markets, replacing those lost when government failed to keep its word. Fencerow to fencerow planting was back, with the promise that when better prices developed around reliable supplies, government would never renege again.
Corn got cheaper. Big agribusiness loved it, and farmers sold their hard work and investment below cost while making a living from government payments.
One of the first new uses found for cheap corn was ethanol. Farmers saw profits beyond the farm gate and decided to cut out the middleman. That’s when a group of farmers from my part of the country took advantage of a Missouri program called the New Generation Coop tax credit to help build an ethanol plant at Craig in Holt County.
When the plant at Craig was built, suddenly there were jobs. And there was a market for corn where there was none before. The same thing happened in dozens of other rural communities as rural investors – they weren’t all just farmers but local citizens and businessmen – decided to make deposits in their future.
Those local markets and jobs that represented personal investments were based on the collateral of a government promise: that there would be reliable markets and growth for renewable energy.
The plan was always that newer, better sources of renewable energy and investment would develop with stable markets.
Ethanol plants across the Corn Belt profited and expanded. More jobs. More growth. Suddenly there was economic stability in farm communities with a 20-year history of decline.
Ethanol is exactly what rural industry should look like. It utilizes abundant resources to create local investment and jobs while supporting inherent agricultural pursuits like crop and livestock farming. Simultaneously, it rebuilds the tax base that rural counties rely on for things like law enforcement, education and roads. (Tax appraisals reflect true value of small industry to rural communities. Sometimes we have to pay taxes whether we like it or not.) Keeping those dollars in the local economy has a big impact. Research shows as much as a 7 to 1 or better multiplier for local dollars spent at home.
One thing that helped ethanol early on was the Environmental Protection Agency rule for adding an oxygenate like ethanol to gasoline.
Big Oil liked methanol better, because it was something they could make with fossil fuel in their own refineries. But when methanol, which most of us know by its nickname of wood alcohol, was shown to be polluting water supplies, EPA made ethanol the sole gasoline additive.
Now methanol is back in the news because tanks containing a form of methanol (4-methylcyclohexane methanol) have contaminated drinking water in West Virginia.
With methanol out of the picture, the ethanol business picked up. Then came President Obama and his promise to develop renewable sources of energy like renewable fuels – biodiesel and ethanol. The government mandated that more renewable fuels be blended with fossil fuel.
Oil companies were told to do it or else.
Now Big Oil says they’ve hit a blend wall. Demand for gasoline has peaked, and they don’t want to comply with the Obama administration’s promise for renewable fuels. The EPA has proposed lowering the renewable fuel standards for 2014.
No one seems to notice that the whole idea behind renewable fuels was to reduce our dependence on fossil fuels. The use of renewable fuels also reduces carbon dioxide emissions and other air pollution.
But jus the hint of EPA’s waffling on renewable fuel is enough to remind the world about the broken promises to U.S. farmers in the past. Corn prices have dropped. Investment has stalled. Earlier price shocks in ethanol markets have resulted in oil companies buying up ethanol plants for pennies on the dollar. Farmers who have invested heavily in themselves and their communities based on the word of their government are wondering:
Will this be just another broken promise?
Richard Oswald, a fifth generation farmer, lives in Langdon, Missouri, and is president of the Missouri Farmers Union.